Tomato plan unreasonable, FPAA says

(UPDATED COVERAGE, Feb. 4) The U.S. and Mexico have agreed to a plan that substantially raises prices for imported Mexican fresh tomatoes, but the association representing U.S. importers said the plan is unreasonable.

The Commerce Department announced the plan on Feb. 2. It sets different floor prices during summer and winter, and also specifies prices for open field/adapted environment and controlled environment production. The plan is not final; comments will be accepted on it until Feb. 11 at the Department of Commerce Import Administration website.

The Commerce Department will consider the comments and release a final version by March 4.

Despite widespread media coverage of a U.S.-Mexico trade war averted, however, the Fresh Produce Association of the Americas, which represents companies that import Mexican tomatoes, is critical of the details in the plan. The FPAA was not involved in the negotiations and president Lance Jungmeyer said it’s not a reasonable solution.

Jungmeyer said many Nogales, Ariz., distributors were initially optimistic when learning Feb. 2 of the agreement maintaining suspension agreement. When more details were released, however, growing numbers of U.S. importers and distributors became worried about the effect of the size of the price increases on buyer and consumer demand.

“A price increase this high gives the U.S. industry more room to maneuver, it gives them plenty of room to sell at 10 cents (per pound) below that floor price all day and essentially keep Mexico out of the market,” he said Feb. 4.

The Commerce Department news release on the agreement paints a different picture.

“I am pleased that we were able to come to an agreement on fresh tomato imports from Mexico that restores stability and confidence to the U.S. tomato market and meets the requirements of U.S. law,” Francisco Sánchez, under secretary of commerce for international trade, said in a news release.

“The draft agreement raises reference prices substantially, in some cases more than double the current reference price for certain products, and accounts for changes that have occurred in the tomato market since the signing of the original agreement," he said in the release.

U.S. growers were unhappy with current floor prices for Mexican tomatoes and in 2012 requested the end of a suspension agreement that set those prices since 1996, stopping an anti-dumping investigation.

After being briefed on the deal by the Commerce Department officials, the Florida Tomato Exchange and Certified Greenhouse Farmers released a statement expressing "tentative support" for the revised suspension agreement.

"The agreement as it is currently structured is a step forward," said Reggie Brown, executive vice president of the Florida Tomato Exchange, Maitland, Fla. Brown said the agreement's higher prices validate the contention of U.S. growers that they have been dumped on for some period of time by Mexican tomato imports. "We still feel very strongly that the cost of production is essential to determining what the correct reference price should be and we look forward in the future for Commerce to obtain that information and adjust the reference prices on that basis."

Martin Ley, vice president of Nogales, Ariz.-based Del Campo Supreme Inc. and spokesman for a consortium of Mexican tomato growers who negotiated the suspension agreement, said in a statement that those growers offered substantial concessions in negotiations over the past year to preserve the suspension agreement.

“Even though no dumping or injury to the U.S. industry was demonstrated by our competitors, over the last year our growers worked with our government to overhaul the whole Mexican industry, broaden the coverage and develop tough enforcement schemes," Ley said in the statement.

Ley said the new floor prices will impose hardships on the Mexican industry, but growers hope the agreement will bring long-term benefits.

"Our compromises are expressions of trust and good faith, the essential ingredients to any bilateral trade relationship, and we look forward to similar expressions of cooperation and good will as we head into the comment period," he said in the statement.

The effective date of any final agreement is projected to be March 4, according to a fact sheet provided by the Commerce Department.

The new reference prices for open-field and adapted-environment tomatoes are 31 cents per pound in the winter and 24.58 cents per pound in the summer, according to the fact sheet. For controlled-environment tomatoes, the price for winter tomatoes is 41 cents per pound, while the summer price for controlled-environment tomatoes is 32.51 cents per pound.

The agreement defines controlled environment tomatoes "as tomatoes grown in a fully-enclosed permanent aluminum or fixed steel structure clad in glass, impermeable plastic, or polycarbonate using automated irrigation and climate control, including heating and ventilation capabilities, in an artificial medium using hydroponic methods."

Specialty loose tomatoes have a reference price of 45 cents per pound for the winter and 35.68 cents per pound in the summer. Specialty packed tomatoes have a reference price of 59 cents per pound in the winter and 46.79 cents per pound in the summer. The agreement defines specialty tomatoes as grape, cherry, heirloom and cocktail tomatoes.

Under the current suspension agreement, minimum prices for all imported Mexican tomatoes, whether field-, shadehouse- or greenhouse grown, are 21.6 cents per pound in the winter and 17.2 cents per pound in the summer, according to the Commerce Department.

In a Feb. 4 news release, Jungmeyer said the new floor prices would serve only what he called the “inefficient” Florida tomato industry.

“It will also be a thorn in the side of U.S.-Mexican relations for years to come,” Jungmeyer said in the release.

The FPAA was not involved with the negotiations between the Commerce Department and Mexican growers. Mexican officials who signed the draft agreement include representatives of grower groups Confederation of Agriculture Associations of the State of Sinaloa, the Agricultural Council of Baja California, the Mexican Association of Protected Horticulture, the Sonora Regional Agricultural Union, and the National Confederation of Vegetable Producers.

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About the Author:

Tom Karst

Tom Karst is national editor for The Packer and Farm Journal Media, covering issues of importance to the produce industry including immigration, farm policy and food safety.
He began his career with The Packer in 1984 as one of the founding editors of ProNet, a pioneering electronic news service for the produce industry. Tom has also served as markets editor for The Packer and editor of Global Produce magazine, among other positions.
Tom is also the main author of Fresh Talk, www.tinyurl.com/freshtalkblog, an industry blog that has been active since November 2006.
Previous to coming to The Packer, Tom worked from 1982 to 1984 at Harris Electronic News, a farm videotext service based in Hutchinson, Kansas.
Tom has a bachelor’s degree in agricultural journalism from Kansas State University, Manhattan.
He can be reached at tkarst@farmjournal.com and 913-438-0769. Find Tom's Twitter account at www.twitter.com/tckarst.